Chapter 7 Minimum Debt - Are You "Broke Enough" To File?
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Chapter 7 Bankruptcy Minimum Debt: Are You "Broke Enough" To File?

If you're struggling with debt, and wondering whether Chapter 7 bankruptcy could help you, one question that often comes up is whether you have enough debt to qualify for bankruptcy protection.

There is no minimum amount of debt that you must have to file Ch 7 bankruptcy, though there are other eligibility requirements. If you are unable to pay your debts and are facing wage garnishment, lawsuits, repossession or other threatening actions from creditors, bankruptcy may be able to help you regain control of your situation.

While bankruptcy isn't for everyone, it is an option that you can explore further with the help of a bankruptcy attorney. You can arrange a free, no-obligation initial consultation with a lawyer - simply fill out the case review form below to get started now.

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Chapter 7 Bankruptcy Filing Requirements

Bankruptcy remains an option no matter how much or how little debt you have. While the bankruptcy court does not outline a Chapter 7 bankruptcy minimum debt threshold that filers must meet in order to qualify for protection, there are other requirements to file.

  • Income requirements: In order to qualify for Chapter 7 bankruptcy, you must pass what's called the Chapter 7 means test. This test compares your income to the income of other families of your size in your state and is designed to make sure that only those who cannot afford to make meaningful debt payments get the protection of Chapter 7 bankruptcy.
  • Filing history requirements: Additionally, if you've filed a bankruptcy petition in the past, you may not eligible for a second bankruptcy discharge until a certain amount of time has passed (the number of years varies depending on which types of bankruptcy you choose to file).
  • Accepted debt requirements: Only certain types of debt can be discharged in a typical Chapter 7 case. Specifically, unsecured debts like credit card bills and payday loans are allowed by the court, but most tax debts and student loans are not. If you have a car loan or mortgage, you may be able to eliminate the debt obligation, but will likely have to part with the property securing the debt in order to do so.

If any of these requirements prevent you from filing a Chapter 7 case, you may want to speak with a bankruptcy lawyer about Chapter 13 bankruptcy, which may allow you to create a debt repayment plan while receiving the full protection of the court.

How Do I Know if my Debt Qualifies me to File for Chapter 7 Bankruptcy?

Given that there is no Chapter 7 bankruptcy minimum debt limit, the question arises of when a person ought to turn to the bankruptcy court for relief from financial distress. Naturally, the answer is different for everyone, but may depend on some of these factors.

  • Types of debt you have: If your debts are primarily unsecured debts considered low-priority by the bankruptcy court (for example, credit card debt, medical bills, cash advance debts, etc.), bankruptcy may offer you a respite from creditors and debt collectors and give you a chance to revamp your finances.
  • Your employment situation: If you're out of work or underemployed and having trouble keeping up with various payments, bankruptcy may help you by discharging certain debts (like those mentioned above), which might allow you to stay current on others (such as a mortgage or car loan).
  • Your non-bankruptcy options: If you have little income and few assets, you may be in a situation in which filing for bankruptcy isn’t necessary. People who lack significant possessions and have little or no income might be considered "judgment proof," meaning that, even if a creditor were to sue the person for the repayment of a debt, that person would be unable to repay the debt because of limited financial circumstances.
  • Other bankruptcy court costs: In order to receive a Chapter 7 debt discharge, you'll have to pay a filing fee, take Credit Counseling and Debtor Education courses, and pay attorney's fees, if you chose to hire legal representation. Typically, none of these fees can be wiped out in your bankruptcy filing. If the cost of bankruptcy is on par with these fees, bankruptcy may not provide the financial freedom you deserve.

Learn More about What Chapter 7 Bankruptcy Can Do for You

If you'd like to learn more about whether Chapter 7 bankruptcy might be able to help you relieve your debt, you may want to speak directly to a bankruptcy lawyer, which you can do by taking advantage of this opportunity to arrange a free legal consultation.

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